The Beck Law Firm, LLC Blog

FINRA to Consider Rule on Disclosure of Recruiting Incentives

According to FINRA's website, the regulator's Board is set to consider several rulemaking issues at its December 6, 2012, meeting, including this one:

Conflicts of Interest Relating to Recruitment Compensation Practices
The Board will consider a proposed rule that would require disclosure to transferring customers of recruitment compensation packages offered to induce registered representatives to move from one firm to another.

There is no publicly available text of a proposed rule at this time, or at least none that I can locate. Dan Jamieson over at Investment News has a story about this, noting that this type of disclosure has been called for in the past, but nothing was ever done.  With the very scant information out there now, I'm not quite sure what significant (or even minor) harm this proposal would seek to cure or prevent.  We'll have to see what the regulator's rationale is for their proposed rule at a later date.  

It appears to me that this is a new proposal that has not yet been put out for comment, so before any rule is forwarded to the SEC for approval, FINRA would go through the regular rulemaking steps including publishing the proposed rule for comment, receiving and reviewing comments from the industry and public, and then consider the proposal - and any needed modifications - from there.  If the Board does approve a rule at the end of that process, the rule must be approved by the SEC as well.  So, we are very early in the process now, but this could be a very interesting process if it goes anywhere.  

 

Is your BCP (Business Continuity Plan) Current? The Regulators Might Be Checking.

Earlier this month, in the aftermath of Hurricane Sandy, it appears that FINRA, in coordination with the SEC and CFTC embarked on a targeted examination of firms to review compliance with BCP (business continuity plan) matters.  They have sent information requests, it appears, to a number of firms that potentially experienced business interruption issues following the storm, or could have experienced such issue.  You can see the gist of the letter and the information sought here.

If your firm was not a recipient of the targeted exam letter, it may still be wise to take a look at your BCP. Based on responses received and information learned by the regulators following this review, these items may fall under increased regulatory scrutiny in exams going forward.  Forewarned is forearmed.  

Breaking News: Schapiro to Leave SEC; President to Tap Walter to Fill Chair Role

Today, the SEC announced that the Chairman of the Commission, Mary Schapiro, will be leaving her post on December 14, 2012, after nearly four years in that role.  

The White House also released a statement today wherein President Obama stated, "I am pleased to designate Elisse Walter as SEC Chairman after Mary's departure. I'm confident that Elisse's years of experience will serve her well in her new position, and I'm grateful she has agreed to help lead the agency."

Elisse Walter has been a Commissioner on the SEC since 2008, when she was appointed by President George W. Bush.  Previously she worked at FINRA (and it was also then known, NASD).  Previously, she had worked as the general counsel for the CFTC and had also worked on staff at the SEC.  During my days at NASD, I had the occasion to interact with Elisse from time to time relating to cases I was working on, as well as for parts of a leadership development program in which I participated while at the regulatory organization.  I found her to be very knowledgeable and capable, and I also found her to be pretty reasonable  - a trait I think is greatly needed for a position like this.  I wish her the best as she prepares to chair the SEC.

When Ms. Walter takes over as chairman, she will have her hands full, including dealing with potential calls for additional oversight and regulation of investment advisers, and the possibility of the institution of a self-regulatory organization (SRO) to oversee investment advisers much like FINRA oversees the broker-dealer industry, under the oversight of the SEC. 

Because Ms. Walter is currently a Commissioner, the President will nominate another person to fill the position that she vacates to become Chairman.  As I write this, I have not yet seen any official announcement from the White House on that.